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The Help-to-Buy scheme appears to have contributed to house price inflation, according to a new report.

HOUSE PRICES IN Dublin have risen by €32,000 in the last six months, according to a property report from MyHome.ie and Davy.

The analysis shows that the asking price for newly listed properties nationally rose by 5% in the second quarter of this year (a 8.9% increase year-on-year). The median price nationwide is now €251,500, an increase of over €24,000 in the last six months.

The corresponding figure for Dublin is €360,000, an increase of €32,000. This represents a 2.8% increase in the second quarter and an annual jump of 10.3%.

The report states that newly listed properties are “seen as the most reliable indicator of future price movements”.

It notes that house price inflation remains on course for double-digit growth in 2017, despite the likely abolition of the Help-to-Buy scheme. The initiative provides a tax refund to first-time buyers of newly built homes. After some criticism, it’s now being reviewed by the Department of Housing.

The report says the scheme had a “significant impact” on the property market – with the average cash rebate being €15,000.

For the entire stock of properties listed for sale on MyHome.ie, prices rose 2.8% nationally and 3.2% in Dublin. The national mix adjusted figure is now €224,500, while in Dublin it’s €313,500.

The author of the report, Conall Mac Coille, chief economist at Davy, acknowledged that 5% was another sharp increase in the price of houses nationally, but pointed out that prices do tend to fall back after summer.

“The outlook for Irish house price inflation will be primarily driven by robust jobs growth, rising incomes and competition among homebuyers, leading to more highly leveraged mortgage lending.

“The likely demise of Help-to-Buy could lead to a rush of transactions in 2017 as first-time buyers move quickly to avail of the scheme and to a slowdown in 2018 as it is phased out. Nonetheless, the bigger picture is that Irish house price inflation should remain robust, driven by the recovering economy,” Mac Coille said.

Speaking about the Help-to-Buy scheme, he said the 1,679 claims approved to date have cost €24.5 million.

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“This means that the average Help-to-Buy cash rebate has equalled €15,000, or 5% of a €300,000 newly-built home. Given the 7,275 applications received so far, the initial estimate that the scheme would cost €50 million may now seem conservative.”

Did Help-to-Buy contribute to house price inflation? What evidence there is suggests it did, as the price of newly built homes is rising much faster than existing dwellings. Of course we have also seen a pickup in lending – in Q1 the average mortgage loan to first-time buyers rose by 9.5% to €194,000 – and this must in part reflect the relaxation by the Central Bank of mortgage lending rules late last year.

Angela Keegan, Managing Director of MyHome.ie, said the continuing disparity between housing demand and supply means houses are being snapped up ever more quickly and competition for properties will intensify throughout 2017.

There were only 21,000 homes listed for sale on MyHome in Q2, down over 11% on the year. This means that just 1% of Ireland’s housing stock of two million homes is currently listed for sale. In Dublin, where demand is greatest, fewer than 4,000 homes or 0.85% of the capital’s stock is listed for sale.

“Not surprisingly, average time to sale agreed for homes has fallen to 3.8 months nationally and just 2.7 months in Dublin. These are the lowest times we’ve seen since we began recording these figures in 2011,” Keegan added.

Sales of €1m homes

A new feature in the Q2 report was an analysis of the sales of homes exceeding €1 million. Last year there were 638 such transactions, four times greater than the 160 recorded in 2011. Not surprisingly, 547 of these €1 million transactions were in Dublin, with Cork recording 21, Wicklow 18 and Galway 12.

Within Dublin, the vast majority of the homes sold for €1 million were on the south side with Dublin 4 (136) accounting for 20% of the national total. Dublin 6 – comprising Rathmines, Ranelagh and Rathgar – had 100 transactions; Dublin 18, which includes the Foxrock area, had 44; Blackrock had 39; Dalkey and Killiney had 36 and Dublin 14 had 28.

North County Dublin saw 20 transactions exceeding €1 million in areas such as Howth, Malahide and Kinsealy. Clontarf also had nine such sales. MyHome.ie currently has 545 listings for sale with an asking price exceeding €1 million. In addition, 221 properties exceeding €1 million have recently had agreed sales.

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